Last August we told you about some welcome news from the nation’s three largest nonprofit information providers – GuideStar, Charity Navigator and the BBB Wise Giving Alliance – teaming up to issue an open letter to America’s donors explaining that overhead ratios are a poor way to understand a nonprofit’s performance or effectiveness.
Now they’re directly addressing us – the nonprofits – and they are looking for our help. As a matter of fact, they’ve told us there are some things about overhead that they hope nonprofits NEVER say again.
Statements like “Only X% of your gift goes to overhead,” or “Only X cents on the dollar go to overhead costs” are doing your nonprofit, your donors and those you serve a disservice.
This reminds me of a conversation I had several years ago with a nonprofit executive who boasted about their overhead of less than 7%, yet lamented for the next 30 minutes about how the organization simply couldn’t get things accomplished. I finally had to ask – do you think your ridiculously low overhead, your unwillingness to invest in infrastructure could be to blame for your woes? And honestly, don’t those you serve deserve better?
So, where do we go from here? In this second letter from the “big three,” they share three things that nonprofits can do to move toward an “Overhead Solution:”
- Demonstrate ethical practice and share data about your performance.
- Manage towards results and understand your true costs.
- Help educate funders (individuals, foundations, corporations and government) on the real cost of results.
KNN resources can help you take the steps needed to help us all work together to dismantle the overhead myth and move toward an overhead solution. Our Principles & Practices for Nonprofit Excellence in Kentucky tools are the perfect place to start and our website is full of links, templates and resources to assist your organization in improving your effectiveness. The Principles & Practices tools outline state and federal legal requirements for your nonprofit and provide guidance on recommended best practices in fourteen areas of nonprofit management. Just by simply using these tools, your nonprofit can become a KNN Best Practices Partner and join with other nonprofits to communicate your organization’s efforts with donors, funders, community members and other stakeholders. Additional tools and resources can be found at www.strongnonprofits.org and www.overheadmyth.com.
I urge you to please start at home – share these resources with your staff, board members and take a moment to reflect on your OWN attitudes about overhead. As this great blog post points out, many nonprofits are perpetuating the very myth we claim we so desperately want to dismantle! I then hope you will seize this opportunity to communicate with donors and funders. It is only through open and honest discussion between donors and nonprofits about the real cost of results that we can make progress and focus on the work of getting stuff done rather than bending over backward to promote our low or non-existent overhead.
I know some of you are thinking “Amen!” and others plan to file this in the “Danielle is off her rocker” folder. Either way, let me hear from you and more importantly, let me know how KNN can help.